Commerce Secretary Gina M. Raimondo on Tuesday unveiled a strategy for the Commerce Department's disbursal of $50 billion that Congress approved to boost domestic manufacturing of semiconductor chips, saying she expected the first money to flow in the spring of 2023.
“With this funding we are going to make sure that the United States is never again in a position where our national security interests are compromised or key industries are immobilized due to our inability to produce essential semiconductors here at home,” Raimondo said at a White House news briefing.
A severe shortage of chips because of disruptions stemming from the COVID-19 pandemic drove up prices of cars and household goods in the past year, contributing to inflation that is running at its fastest pace in about 40 years.
Raimondo said the U.S. uses 25 percent of the world’s cutting-edge chips but doesn't make any of them. Advanced chips are mostly made in Taiwan, but China is ramping up design and production of such chips as well.
President Joe Biden signed into law in early August a bill that would provide the $50 billion of federal funding to private companies to boost domestic design, research, and manufacturing of semiconductor chips.
The administration is touting the program as a major job creator in battleground states in the November mid-term elections.
Raimondo said the program would create “tens of thousands of good paying manufacturing jobs and more than 100,000 construction jobs” that would expand opportunities for groups that have historically “not had a chance to participate in this industry,” including women, people of color, veterans and those living in rural areas.
Intel, Micron, and other chip makers have announced plans to open domestic manufacturing plants in anticipation of the federal program. Biden plans to participate at a groundbreaking event for an Intel plant in Ohio on Friday. Rep. Tim Ryan, a Democrat in a close race to flip a Ohio Senate seat, said he will also attend. Intel says it will spend $20 billion to build two manufacturing plants in Ohio.
"We're finally bringing home jobs that have been overseas for a while," Biden said at a cabinet meeting Tuesday.
The Commerce Department’s strategy calls for balancing “urgent needs in the semiconductor industry with long term strategic goals.”
The department will spend about $39 billion on domestic chip manufacturing, according to the strategy. About $28 billion of that will be in the form of manufacturing incentives for U.S. production of “bleeding edge logic and memory chips that require the most sophisticated processes available,” Raimondo said, adding that $10 billion would go toward new manufacturing capacity for mature or current generation chips.
Another $11 billion would go toward research and development programs, including the creation of a National Semiconductor Technology Center at the department, she said. The department also released an executive summary of the strategy.
Raimondo said the department would call for applications from companies starting about February 2023 and expects to announce awards in early spring. The first set of grants are likely to be for smaller projects and the bigger ones may come later, she said.
Raimondo pledged close department scrutiny of how the money is used, and plans to hire 50 legal and technical experts to oversee the spending.
Some lawmakers and other critics call the program a handout to tech companies that moved chip manufacturing outside the U.S. during the last two decades and are now getting taxpayer dollars to shift it back.
“This is not a blank check for companies,” Raimondo said. “This is not for them to pad their bottom line.”
Companies taking the federal funds cannot use the money for stock buybacks, to boost profits, or shift manufacturing overseas, especially to China for a period of 10 years, she said.
Each application and approval will be negotiated “one deal at a time, and [the department will be] really putting the screws to these companies to prove to us …that the money is absolutely necessary to make these investments,” Raimondo said.